Can City-Owned Grocery Stores Survive? Exploring Mamdani’s Proposal for New York

This November, Zohran Mamdani, 34, won the New York mayoral election, becoming the youngest leader of the city in over a century. Ugandan-born, Democrat and previously a relatively unknown state assembly member, he gained momentum through an online campaign focused on affordability. Among his proposals was the creation of a network of city-owned grocery stores.

The policy aims to combat rising grocery prices and restore purchasing power of families. Mamdani argued that these stores would not be profit-driven but would focus on keeping prices low by relying on wholesale pricing, centralized warehousing and distribution, partnerships with local neighbourhoods, and exemptions from rent and property taxes.

The feasibility of this model raises significant questions. Can a store that never needs to worry about bankruptcy operate efficiently? If private businesses struggle to survive, what guarantees that a government-run store would fare better? And if the store runs at a loss, will shoppers or taxpayers absorb the deficit? For FY 2026, New York is already projected to face a budget deficit of $5–8 billion, which intensifies concerns about adding new financial burdens.

City-owned grocery stores are not a new concept in the United States. A notable success is St. Paul Supermarket in St. Paul, Kansas. In 1985, the small town lost its only grocery store, leaving residents to travel more than 50 km to access basic food. To address this “food desert,” the city partnered with a local development corporation and secured a USDA loan to construct a new store. Initially run as a public–private partnership, the city eventually took over operations, employing staff as municipal workers. This intervention succeeded because basic groceries were treated as a “public good”, filling a gap abandoned by the market but still essential to the community.

However, success is far from guaranteed. At a short distance from St. Paul, the city of Erie offers a contrasting example. After taking over its local grocery store, the municipality struggled to keep it financially viable. Despite removing taxes and rent, the costs of staffing, utilities, and shoplifting were too high, and the store was eventually put up for sale. Although Erie faced a similar risk of becoming a “food desert,” the city ultimately found that it could not run the business effectively.

Other examples reinforce the fragility of this model. In Caney, Kansas, the city council is selling the city-owned grocery store after failing to achieve profitability. In Florida,

Baldwin Market underwent a similar attempt: the city reopened the store with a $150.000 loan, but after just five years, it closed in March 2024 due to ongoing losses.

City-owned grocery stores face intrinsic challenges. Grocery retail operates on very low margins, and large chains benefit from economies of scale that small municipal stores cannot match. In the examples cited, chains like Dollar General and Walmart can purchase goods at lower wholesale prices in large volumes, making it very difficult for small city-run stores to compete.

Economic theorists provide further caution. Walter E. Williams emphasized that profits and losses are essential for affordability and efficiency. Profits are not exploitative; they incentivize firms to satisfy customers, discover least-cost production methods, and allocate resources from lower to higher-value uses. Ludwig von Mises addressed a related concern, explaining in his book (Socialism: An Economic and Sociological Analysis) that when state-run stores operate at a deficit, taxpayers typically cover the shortfall, often through higher taxes. This underscores a key risk of government-run enterprises as financial losses are transferred to the public.

Applying this model to New York City presents an even more complex challenge. With over 8 million residents, logistical, financial, and political obstacles multiply. While the city’s scale might enable some centralized efficiencies, extremely high rents, labour costs, and a strict regulatory framework would increase operating expenses. City-run stores would face intense competition from thousands of private grocers, supermarkets, discount chains, and local bodegas. Implementing municipal stores could destabilize existing businesses, creating market distortions without guaranteeing affordability. Moreover, political interference, bureaucratic inefficiency, and difficulty of quickly responding to consumer demand in a city this large, makes financial losses highly likely.

In conclusion, while city-owned grocery stores can succeed in small towns like St. Paul, most historical examples show the model is fragile. Experiences in Erie, Caney, and Baldwin suggest that government-run stores often operate at a loss, with taxpayers covering deficits. Economic theory provides caution: profits and losses act as signals for efficiency and resource allocation, guiding businesses to produce what consumers value most. When the government absorbs losses, resources may be misallocated and the financial burden falls on taxpayers. In New York City, with its size and costs, these risks would be magnified, making the plan unlikely to succeed at scale.